Did you know that as a Non-Resident Indian (NRI), you can sell property in India and remit up to $1 million from the sale proceeds each financial year? NRIs are allowed to sell property in India without needing permission from the RBI (Reserve Bank of India). The sale proceeds can be freely transferred to a resident of India. However, there are a few things to consider. Here’s how it works:
Selling Property as an NRI:
NRIs are allowed to sell immovable property in India without the need for Reserve Bank of India (RBI) permission. This applies when selling to a resident of India, making the process smoother. The sale proceeds, however, undergo deductions, including income tax and broker commissions, which can be on the higher side. As an NRI seller, it’s important to be cautious about income tax rates and ensure you’re taking advantage of any available deductions or exemptions.
Interestingly, NRIs cannot repatriate funds outside India from property sales if the property was not initially purchased using foreign exchange in India. Yet, there’s good news – the RBI has provided relief to NRIs. Through notification number 13(R)/2016 dated April 1, 2016, NRIs can remit funds up to $1 million in each financial year.
Understanding the $1 Million Limit:
This means that, for instance, if you, as an NRI, sold a property in the financial year 2023-24 for $1.8 million, you can remit up to $1 million in the same financial year. The remaining amount of $0.8 million can be transferred in the next financial year, 2024-25.
Tax Considerations for NRI Sellers:
As an NRI seller, it’s crucial to be cautious about the income tax implications, given the high flat rate of 20% on the sale of long-term gains from property. However, NRIs have the option to apply for a lower Tax Deducted at Source (TDS) deduction certificate, especially if the gain is not significant or there’s a loss. The process for obtaining a lower TDS certificate is relatively quick, involving filing Form 13. Seeking assistance from a chartered accountant is recommended due to the professional guidance needed for the documentation.
Buyer’s Awareness:
For buyers of property from NRIs, it’s essential to know the seller’s residential status. The TDS rate depends on whether the seller is a resident or an NRI. If the seller is a resident, the TDS rate is 1%, but if the seller is an NRI, the TDS rate increases to 20%.
Practical Tip – Remitting Funds:
Now, let’s talk about remitting funds. The RBI allows NRIs to remit up to $1 million per financial year from the sale proceeds of property through Notification Number 13(R)/2016 dated April 1, 2016. This means that if you sell property for $1.8 million in a financial year, you can remit $1 million in that year and the remaining $0.8 million in the next financial year.
Here’s an example: You sold a property that you bought while you were a resident of India in the financial year 2023-24 for $1.8 million. In this case, you can remit up to $1 million in the financial year 2023-24 and the remaining $0.8 million in the next financial year, 2024-25.
If you’ve sold a property for more than $1 million in a financial year, like in 2024, you can remit up to $1 million before March 31st of that year. Remember, the Indian financial year runs from April 1st to March 31st. So, it’s a good idea to remit funds before March 31st and transfer the rest in the next financial year, such as 2024-25.
Final Words:
Selling and remitting funds as an NRI involves understanding the regulations, considering tax implications, and being mindful of timelines. By staying informed and seeking professional advice when needed, NRIs can navigate the process smoothly and make the most of the opportunities available. If you are planning to sell property as an NRI, ensure you are well-versed with the rules and take the necessary steps to optimize your financial transactions.
